How to Choose a Lender for Student Loan Refinancing

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Casey Bond

By Casey Bond

February 6, 2020

You’ve heard that student loan refinancing can save you money. But the truth is, that’s only true if you work with the right lender. 

Refinancing student loans can come with hidden costs and other gotchas. So, before you sign an application, learn how to choose the best lender for student loan refinancing first. Keep in mind that refinancing federal student loans means a loss in many benefits that only federal loans offer. These include potential loan forgiveness, income-driven repayment plans, generous deferment options if you become unemployed or have an economic hardship, and an option to discharge loans for death or disability.

1. Eligibility Requirements 

There are a handful of eligibility requirements for student loan refinancing you’re expected to meet. In general, you’ll need a good credit score, steady job and decent income. However, these requirements are ultimately decided by individual lenders, and the specific requirements you have to meet might vary.

For example, Earnest requires you to have a credit score of at least 650 and at least two months’ worth of savings. Elfi, on the other hand, requires a credit score of at least 680, along with a minimum loan amount of $15,000. 

Before deciding on a refinancing lender, it helps to familiarize yourself with their eligibility requirements. Compare factors such as:

  • Credit score requirements
  • Income and employment requirements
  • Eligible degrees and schools
  • Loan minimum and maximum amounts
  • Maximum debt-to-income ratio, or the amount of your monthly income that goes toward repaying debts

2. Interest Rate

When comparing refinancing offers, the interest rate is one of the most important factors. Even a couple percentage points can make a big difference in how much you end up paying over the life of the loan.

Use our Student Loan Refinancing Calculator to estimate how much you could lower your total and monthly loan payments by refinancing your student loans.

For example, say you refinance a $20,000 loan over 10 years at a rate of 7%. Your monthly payments would be $232 and you’d spend a total of $7,866 in interest by the time the loan is paid off. Now say you got an interest rate of 5% instead. Now, your monthly payments would drop to $212 and you’d pay a total of $5,456 in interest — a savings of $2,410.

Factors that can impact the rate you’re offered by a particular lender include your credit score, length of the loan, whether the loan is fixed or variable-rate and more.

3. Fees

In addition to the interest rate, there are other student loan costs that can be tacked on, making it more expensive overall. 

For example, student loan refinancing sometimes comes with an origination fee. This fee is charged by lenders to cover the administrative costs of processing the loan. Often, the origination fee is rolled into your principal loan balance, meaning you end up paying interest on it, too. However, not all lenders charge origination fees. SoFi, LendKey, Common Bond, College Ave and Laurel Road are a few that don’t.

Another fairly common student loan refinancing fee is a prepayment penalty. Some lenders will charge a fee to pay off your loan before the official term is up. So, if you expect a future windfall or plan to aggressively pay off your loan, it’s a good idea to ask whether the lender charges a fee for prepayment.

Other fees to watch out for include late payment fees, returned payment fees and fees for arranging alternative payment plans. Always ask prospective lenders for their fee schedule so you know what potentially hidden costs there are.

4. Additional benefits and perks

When choosing a student loan refinancing lender, don’t just focus on the costs. There might also be certain benefits that one lender offers over another. A few examples include:

  • Hardship forbearance: Though private student loans don’t come with the same federal protections of deferment and forbearance that federal loans do, some refinancing lenders offer it anyway. For example, Education Loan Finance (Elfi) allows some borrowers to pause payments for up to a year if they experience financial hardship or medical issues. 
  • Cosigner release: If your credit wasn’t great when you first applied for student loan refinancing, you may have applied with a cosigner to get approved. However, if your situation has changed and you want to relieve your cosigner of that responsibility, your lender will need to offer cosigner release. Citizens Bank, for instance, allows cosigner release after you’ve made 36 consecutive, on-time payments.
  • Professional services:Paying off your student loan can be a lot easier with the help of a high-paying job. Lenders such as SoFi offer customers professional opportunities like career coaching and entrepreneurship programs.

5. Reputation

Finally, it’s always a good idea to find out if other student loan refinancing customers enjoy working with the lender you’re considering. Before signing the dotted line on a refinancing offer, check with the Consumer Financial Protection Bureau and Better Business Bureau to find out if there are complaints against the company. A good old-fashioned’ Google search never hurts either.

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At, our goal is to help you make smart decisions about saving and paying for education. Some of the products featured in this article are from our partners, but this doesn’t influence our evaluations. Our opinions are our own.

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